The Trump administration said on July 7 that it would temporarily suspend some payments to health insurers under the Affordable Care Act's (ACA) risk adjustment program, in light of a ruling earlier this year by a federal district court in New Mexico. The CMS, which noted that a federal court in MA found its formula fair, has asked the New Mexico court to reconsider its decision and said it is seeking a quick resolution to the legal issue.
The idea behind the program is to remove the financial incentive for insurers to "cherry pick" healthier customers.
The risk adjustment program redistributes funds from plans with lower-risk enrollees to plans with higher-risk enrollees. The program is based on a patient's risk score, which is determined by a person's demographic information and health condition.
The CMS said a February federal court decision in New Mexico, which ruled it was using a flawed formula to determine its collections and payments amounts, prevented it from continuing the program. It added that the move comes at a critical time when insurance providers are developing premiums for 2019 and states are reviewing rates. While the administration says it is required to stop payments because of the court decision, insurers say the move could result in higher premiums for millions of individuals and small businesses.
"So much uncertainty put in the market at this point of time is very unnerving", said Ritu Agarwal, senior associate dean of research at the University of Maryland Robert H. Smith School of Business, who follows the health care system. "As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold", CMS administrator Seema Verma reportedly said in a statement. Legacy insurers that have a wealth of patient data may have a leg up on coding.
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The payments are meant to help stabilise health insurance markets by compensating insurers that had sicker, more expensive enrollees in 2017.
"We were disappointed by the court's recent ruling".
Critics said it was just the latest example of the Trump administration undermining the ACA and harming consumers who purchase individual policies. But another district court in MA upheld the formula.
"We urge the Trump administration to back off of this unsafe and destabilizing plan, and instead begin working on bipartisan solutions to make coverage more affordable", said Brad Woodhouse, the executive director of Protect Our Care, a progressive group that supports Obamacare. "It will undermine Americans' access to affordable coverage, particularly for those who need medical care the most".
New Mexico Health Connections and Minuteman Health of MA, two small nonprofit insurers, filed lawsuits in 2016, contending that the Obama administration created an inaccurate formula that unfairly rewarded large insurers.